Financial Conduct Authority  

FCA cranks up action against introducers

FCA cranks up action against introducers

The Financial Conduct Authority is clamping down on firms operating at the margins of regulated activity that it believes pose a serious risk to consumers, a lawyer close to the situation has said.

In a series of recent proceedings the FCA has sought to prosecute so-called introducer firms deemed to have misled consumers by not being clear about their unregulated status, or by transferring money into risky investments which later failed.

The FCA said it was acting mainly on its consumer protection objective but also to try and recoup investor money where possible.

Introducers typically solicit business for regulated financial advisers in exchange for some form of fee or commission if the individual becomes a client of the advice firm.

The regulator’s latest action was taken against introducer firms Avacade Limited and Alexandra Associates, which are alleged to have promoted self-invested personal pensions (Sipps) and alternative investments such as tree plantations.

Previous legal action was brought against the likes of Asset Land Investments and Capital Alternatives for promoting and operating collective investment schemes without authorisation.

“It’s part of a common theme that the FCA has taken more action in recent years against unregulated introducers,” solicitor at FS Legal, Tobias Haynes, said.

“Previously the FCA went after the regulated firms but in the past couple of years [that has shifted].”

The FCA said in its annual enforcement report for 2016 to 2017: “We received 8,612 reports this year of potential unauthorised activity in the UK.

“If the firms and/or individuals reported to us fall within our remit then we investigate and take action on as many as we can, identifying and determining the most serious matters that pose the greatest risk to consumers.

“This ranges from publishing ‘unauthorised firms and individual warnings’ and taking down websites to taking civil court action to stop activity and freeze assets, insolvency proceedings and, for the most serious cases, criminal prosecution.”

The report showed enforcement cases involving unauthorised business almost doubled in the last year, from 35 in April 2016 to 69 in March this year.

The problem intensified following the pension freedom reforms, when a flurry of unregulated introducers started to target retirees for their pension cash to be invested in often shady overseas projects.

It led to the regulator issuing various warnings to those over 55 to be vigilant about scam investment deals.

The FCA said in its latest accounts at least 40 per cent of the reports it received in 2016 to 2017 about possible pension scams were concerned with unauthorised introducers.

Mr Hayes said the FCA's actions were "commendable", albeit the damage was often already done, leaving the regulator to try and recover any investor capital with little chance of success.

"The way to stop that is when the regulator becomes aware they need to act at an early stage as an intervention, then try to reveal any transactions before the money disappears," he said.